The Economics of College

With the renewed debates about “is college worth it” going on I found it interesting to look at the history of College. 150 years ago, college was where some went to prepare for the ministry or a profession (law, or medical – accounting was not yet recognized as a profession), but mostly it was where you went to become part of the “ruling elite.” A vast majority of people did not go to college and college was even seen as a way to “counteract the overweening mercantilism of the time.” For those of you not used to 150 year old language that means college was seen as a counter-weight to the excess of the business world.

Oh how things have changed. While college is still worthwhile on a strict Net Present Value (NPV) basis of the additional earnings versus the cost, that is based on averages. Someone that pays $50,000 a year to attend a private school to get a degree in social work that will earn them $30,000 a year doesn’t have the same NPV calculation as someone who attends a state or community school to get an accounting degree and begins earning in excess of $40,000 right out of school with raises usually in fairly quick succession after that.

The ultimate irony is that the business school is now seen as the NPV leader in colleges across the country and accounting is the cornerstone of that leadership. And it is important that it stay that way. While exceptions can always be sited, economics, like demographics roll forward like the tide coming in on a beach. If we want to continue to attract our share of the best and the brightest to our profession then we need to make sure the economics of attending college pay off as well or better for accountants than other majors.